Interview with Hartwig Masuch about BMG - Bertelsmann SE & Co. KGaA

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News | BMG | Berlin, 04/13/2017

Interview with Hartwig Masuch about BMG

 ‘BMG Is On Its Way To Becoming An All-Rounder’

Whether it’s the Rolling Stones or Scorpions, Black Sabbath or Iron Maiden, Jean Michel Jarre or Peter Maffay ... It seems as if yesterday's big stars are the key to success for one music company of the present and future: BMG. And this impression is by no means misleading: “A musician’s long-term, deep-rooted relevance is far more important to us – and more profitable – than any one-hit wonder,” says Hartwig Masuch, who knows the music business better than nearly anyone else. The founder and CEO of BMG talks to BENET about his company’s brilliant start to 2017, a musical year from which he is expecting many other great things, incidentally, and about BMG's path from music publisher to a new kind of all-round music company.

The deal with Nickelback and the takeover of the BBR Music Group at the end of January, then the exclusive contract with Netflix and the creation of the Production Music Agency in early February – Mr. Masuch, BMG has got off to a flying start in 2017. How come? And more importantly: Where does it all go from here?

Hartwig Masuch: We started the year strong – and really this was just the start. Things will continue like this in the weeks and months ahead. Of course, I can’t say anything yet about the artists who will soon be joining us. But one thing is certain: Nine years after its founding, BMG has arrived in the music world for good, and is really picking up speed now. Today, artists are showing an interest in us who could go to one of the majors, Sony or Universal, at any time. They are weighing us up against the majors – and more and more are choosing BMG because we have proven that we can build global music careers, support them, and keep them going. The principle is obvious: Success breeds success. The more musicians are successful with BMG, the more others will see this and come to grow big at our side as well...

... or in most cases, to stay big. How is it that so many BMG artists, from the Stones to the Scorpions to Jean-Michel Jarre, have already been in the business for so long?

Hartwig Masuch: At first glance this may seem surprising, because from the outside looking in, the music business seems to revolve around current one-hit pops. But this is deceiving. What counts is the long-term, deep-rooted relevance of an artist and their music. And there are facts to back this up: the sold-out mega concerts of the old stars as well as the fact that 70 percent of all streaming on Spotify is “deep catalogue,” i.e. songs from bygone decades. By the way, this goes for the whole industry: 70 percent of revenues are generated with established musicians, 30 percent with new ones. In a given month, the revenues of all the Top 50 songs together make up just three percent of the music business in the U.S.

So, all of this has nothing to do with the nostalgia of a music manager who accompanied so many of these stars in their careers?

Hartwig Masuch: Everyone here at BMG loves music, loves their music. I’m no exception, of course. I’m happy to be working with some idols of my youth today. But I also know that other idols didn’t make it and now drive cabs. Each decade of musical history has created five or six icons. Many of them are signed with us now. Nevertheless, we can and must rationalize all this as a business, too. And then we see that the over-40 audience has the most money and also spends the most on music. Their musical tastes are therefore more relevant to us than the fast-changing tastes of teenagers. And for me, by the way, it’s very clear that our time will also create its own icons – but we will only know in retrospect what lasts.

So is the 40+ generation in the process of rediscovering its music?

Hartwig Masuch: You could say that – and we have digitization to thank for it. Using the search functions and algorithms of streaming services, anyone can compile a playlist of the great hits of their youth within seconds. This also makes it definitively clear that in our age of digitization, the listener’s personal music taste alone determines the sale. The record industry has completely lost its decision-making powers because it is no longer relevant what music it produces, burns onto a CD, and puts on the market. None of that matters at all today.

…but corresponds precisely to BMG’s business model?

Hartwig Masuch: BMG is indeed the world’s first fully digital music company, and it reacts comprehensively to an increasingly digital music landscape. We think digitally, and we act digitally. As well as globally, rapidly and flexibly, but above all always in the best interests of the artist, who also gets the biggest piece of the financial pie – 80 percent, that is. I always like to remind people that BMG was founded in the same year as Spotify and therefore streaming. This is our world, not that of physical recording media. But it’s also the future of music. Today, no one doubts that any more.

Since 2008, BMG has conquered the music publishing business with this attitude, but in the meantime, it’s increasingly turning to recorded music. Why?

Hartwig Masuch: Because the recorded-music business is increasingly being run according to the mechanisms of music publishing, due to the many different, usually digital, monetization channels. Both businesses work worldwide, digitally and without physical sound media. In addition, the boundaries between the two are blurred. A&R, for example, i.e. the development of a musician, no longer even makes a distinction between them. However, and this is the crux of the matter, for the same kind of transaction, revenues in the recorded-music business are eight to ten times as high as in music publishing. That understandably has great appeal for us.

So, BMG is on its way from music publisher to all-round music company... 

Hartwig Masuch: ... of a new kind. Yes, that's true. I expect that our businesses will move towards 50:50 or even 60:40 in favor of recorded music. Today it accounts for just 10 percent. But as I said, that’s where it’s at. And the artists are happy, they’re actually demanding to get all services and an all-round hassles-free package including management from a single source. And I mean that literally: With us, a given artist is looked after by one employee. Mutual trust is crucial.

But if you’re going to be an all-rounder, why was the biggest recording deal in BMG’s history with the BBR Music Group, a Country label of all things?

Hartwig Masuch: There are three good reasons for this: First, because this deal expands our presence in an attractive segment of the world's most important export music market. Secondly, because Country has a huge, worldwide fan base far beyond the borders of the U.S., which we can reach digitally like no other music company. And third, because Country is no longer Country. Contemporary Country music, the kind that BBR makes, has mutated into mainstream rock. While Urban and Pop music have their home in New York, Nashville is increasingly becoming a magnet for rock artists. You’re as likely to meet a Jon Bon Jovi in ​​the studio there as a Jason Aldean, one of Country’s most successful musicians. Aldean is signed to BBR Music – and his music, too, often has more in common with Rock than with Country. Incidentally, the same is true for a superstar like Taylor Swift.

What role doesthe U.S. play for the BMG overall?

Hartwig Masuch: We generate half of our revenues in the U.S. On the one hand, there is the exceedingly important North American market itself, and on the other, there is a clear shift taking place from the U.K. to the U.S., as far as successful music exports are concerned. The starting point for the global success of an artist today is usually the U.S. This goes for music as well as for movies. For our international business, the U.K. remains number two, followed by Australia.

And Nashville, Tennessee, is on its way to becoming the music capital of the U.S.?

Hartwig Masuch: That’s the way I see it. Life in New York has just become too expensive for many artists. Nashville, on the other hand, has been cleverly luring them for several years: with a more favorable environment and a perfect infrastructure for music. There are state of the art studios, more and more producers and music companies are basing themselves in Nashville, and the stars and talent are following one by one. The creative scene is shifting to be here – and we, BMG, are right there with them.